Why Amazon collects local sales taxes in other states — but not Alaska

(Creative Commons photo by Adrienne Hoffman)

If you live anywhere in the country with a sales tax, the online retailer Amazon collects it – except in Alaska. Alaska is unique because it’s the only state with local sales taxes but no statewide tax.

Some in Alaska want to see changes that would affect Amazon and other online sellers.

Lisa Ryals owns Lisa Davidsons Boutique, a women’s clothing store in downtown Juneau. She said as a Juneau resident, she’s disappointed that online retailers who sell similar products don’t collect the city’s 5-percent sales tax.

“My biggest concern is actually for the revenue received for the community,” she said. “When people stop buying locally, they lower their choices that are available, and they lower the funding for municipal things in our community, as in police, fire, emergency, schools, roads and those types of maintenance situations.”

Ryals would like to see Amazon and other online retailers collect sales taxes, like her brick and mortar store.

“I think Amazon should be a big enough company to also be able to have self-regulation and be honest with all of the communities that it’s dealing with,” she said. “By not having employees here that would contribute indirectly into the economy of Alaska, I do think that they have an obligation to Alaskan customers to collect some sort of revenues that let us live here.”

Advocates for municipal government are sympathetic to local retailers. Kathie Wasserman, executive director of the Alaska Municipal League, supports simplifying sales tax collection by having a single organization that could collect these taxes. This would require federal action. But until that happens, Wasserman said Amazon should be able to collect local sales taxes — even though each Alaska municipality has its own tax rate and rules on what sales are subject to taxes.

“I mean, if they can get drones to deliver your book to you, I’m sure they could do the sales tax if they really wanted to,” she said. “Obviously, it’s not top on their agenda.”

As of April, Amazon is collecting sales taxes in every state with one. But some of the collections are voluntary. That’s because federal law only requires companies to pay sales taxes in places where they have physical businesses. For example, in Juneau, Costco and Home Depot collect sales tax on internet sales because they have stores in the city. Amazon has chosen not to collect sales taxes at a local level in several states, including Alaska.

Juneau officials are planning to research in the next six months how much money the city is missing out on without online retailers collecting sales taxes. This would also give the city a better sense of what it could lose in the future as residents make more of their purchases online.

Juneau Assembly member Jesse Kiehl said he doesn’t expect Amazon and other retailers without physical locations in Alaska to start collecting sales taxes in the state anytime soon.

“I think it would be good to level that playing field between local retailers who provide things here in Juneau, they employ people that pay rent or they own buildings, and you can’t always wait for somebody to deliver what you need,” Kiehl said. “If you don’t have healthy local retailers, you’re stuck if your only option is to order online.”

Kiehl noted that no change is likely until there’s a change in federal law. There is a bill that would require online retailers to collect local sales taxes. It’s called the Marketplace Fairness Act. But Congress hasn’t passed the bill, which has been introduced several times.

There are communities in Alaska that don’t want to see a change. They include Unalaska, which has a 3-percent sales tax. That falls heavily on fuel for the city’s commercial fishing industry. And Unalaska Mayor Frank Kelty noted there are few local sources for many products. So online sales taxes would be costly.

“I know people that buy dog food, 50-pound bags, 100-pound bags of dog food,” Kelty said. “For my goldfish, my aquarium supplies all come from Amazon, because there’s no store. You know, it’s just we have to try and wait for it to come from Anchorage or something by mail.”

Amazon didn’t respond to requests for comment for this story.

There’s no clear resolution on the horizon. But the issue could become more urgent if Gov. Bill Walker and the Legislature turn to a sales tax as part of a long-term plan to balance the state’s budget. So far, they have declined to pursue one.

Andrew Kitchenman

State Government Reporter, Alaska Public Media & KTOO

State government plays an outsized role in the life of Alaskans. As the state continues to go through the painful process of deciding what its priorities are, I bring Alaskans to the scene of a government in transition.

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